Presentation on Accounting Standard 1

BY AAKANKSHA PARIHAR ABHISHEK GOYAL AISHANI TANEJA ANCHAL ARORA

Meaning of accounting Standards and accounting policies

'Accounting Standards' means the standard of accounting recommended by the ICAI and prescribed by the Central Government in consultation with the National Advisory Committee on Accounting Standards constituted under section 210(1) of companies ACCOUNTING POLICIES refer to the specific accounting principles and methods of applying those principles adopted by enterprise in the prepration and presentation of final accounts

Accounting Standard (AS) 1: Introduction

Primarily deals with disclosure of accounting policies The accounting policies vary from enterprise to enterprise. Disclosure is necessary if the view presented is to be properly appreciated Purpose is to promote better understanding of financial statements separate statement of accounting policies is attached with the reports presented to shareholders in India Nature and degree of disclosure vary considerably between various corporates Disclosures facilitate meaningful comparisons

DISCLOSURE OF ACCOUNTING POLICIES

1. All accounting policies should be disclosed in one place 2. Disclosure cannot remedy a wrong or inappropriate treatment of items in accounts 3. Any change which has no material effect but is expected to have any material effect later on should be appropriately disclosed 4. All the disclosures should form part of financial statements 5. Any change in accounting policy which has material effect should be disclosed.

Considerations in the selection of Accounting Policies

1. The Primary consideration in the selection of accounting policies by an enterprise is that the financial statements prepared and presented on the basis of such accounting policies should represent a true and fair view of the state of affairs of the enterprise as at the balance sheet date and of the profit or loss for the period ended on that date.

2. The major considerations governing the selection and application of accounting policies are:
a) Prudence Profits are not anticipated . Provision is made for all known liabilities. b) Substance over Form Transactions and events should be governed by their substance and not merely by the legal form. c) Materiality Items the knowledge of which might influence the decision of the user of the financial statements.

ACCOUNTING ASSUMPTIONS
Certain fundamental accounting assumptions underlie the preparation and presentation of financial statements. They are usually not specifically stated because their acceptance and use are assumed.Disclosure is necessary if they are not followed.

The following have been generally accepted as fundamental accounting assumptions: Going Concern-The enterprise is normally viewed as
a going concern, that is, as continuing in operation for the foreseeable future.

Consistency- It is assumed that accounting policies

are consistent from one period to another.

Accrual- Revenues and costs are accrued, that is,

recognized as they are earned or incurred and recorded.

AREAS IN WHICH ACCOUNTING PRINCIPLES ARE ENCOUNTERED :The following are examples of the areas in which different accounting policies may be adopted by different enterprises:-

Methods of depreciation, depletion and amortisation Treatment of expenditure during construction Conversion or translation of foreign currency items Valuation of inventories Treatment of goodwill Valuation of investments Treatment of retirement benefits Recognition of profit on long-term contracts Valuation of fixed assets Treatment of contingent liabilities.